Mortgage rates drop again but chance of Fed cut also falls

For the first time since mid-April mortgage rates fell below 6.7%, but the data doesn't take into account the diminished likelihood the Federal Open Market Committee will reduce short-term rates at this month's meeting.

It is a result of this morning's jobs report coming in hotter than expected, with observers now postulating the Fed is more likely to hold rates in place, in spite of the pleadings of President Trump and Federal Housing Finance Agency Director Bill Pulte.

The rates the Fed controls do not directly set mortgage pricing, but other indicators such as the 10-year Treasury yield react to views on the direction of the economy.

The 10 basis point decline in the 30-year fixed rate mortgage was the largest weekly movement since the 21-basis point increase in the April 17 Freddie Mac Private Mortgage Market Survey. That followed a 13 basis point drop for the first week of March.

The 30-year FRM averaged 6.67% in the July 3 survey, down from last week when it was 6.77%. A year ago it averaged 6.95%.

Meanwhile, the 15-year FRM averaged 5.8%, from last week's 5.89% and from 6.25% as of July 3, 2024.

Why mortgage rates moved lower this week

It is the fifth week in a row rates have dropped.

"This is the largest weekly decline since early March," said Freddie Mac Chief Economist Sam Khater in a press release. "Declining mortgage rates are encouraging and, while overall affordability challenges remain, we are seeing more sellers enter the market giving prospective buyers an advantage."

Today's PMMS report is "another positive sign in a multi-week trend of gradual improvement," said Samir Dedhia, CEO of One Real Mortgage, in a comment. "This steady movement is creating some much-needed stability in the market and giving buyers and homeowners more confidence heading into the heart of summer."

The 10-year Treasury has been on the rise all week. It was at 4.33% as of 11 a.m. on Thursday morning. But it closed on June 30 at 4.23%. This was down by 5 basis points from the June 27 close.

What other mortgage rate trackers are showing

Zillow's rate tracker put the 30-year FRM at 6.78% on Thursday morning, up one basis point on the day, but two basis points lower than last week's average.

Lender Price data posted on the National Mortgage News website indicated the 30-year FRM at 6.792%, compared with 6.837% a week ago.

"Mortgage rates continued to drift lower this week, to the levels seen in April, driven by cooler-than-expected economic data," said Zillow Home Loans Senior Economist Kara Ng in a Wednesday evening statement. "While tariffs continue to pose an upside risk to inflation, particularly as the deadline for a 90-day tariff pause expires on July 9, market narrative has focused on a cooling economy instead."

The Mortgage Bankers Association's Weekly Application Survey put the conforming 30-year FRM at 6.79% as of June 27.

"Mortgage rates have fallen five weeks in a row, and haven't been this low since April," said Holden Lewis, home and mortgage expert at NerdWallet, in a comment issued after the MBA data came out. "This decline in rates should bring out home buyers, who will find that they have negotiating power and a plentiful selection of houses to choose from."

However, one market participant is still optimistic for a July FOMC reduction. "Despite this better-than-expected payroll report, I suspect that the Fed may still cut key interest rates in late July if the inflation news continues to come in below economists' consensus expectations," said investment banker Louis Navellier in a commentary.